Broker Negligence Attorneys

Did your broker fail to follow your directives or fail to factor your age and other circumstances relating to your financial situation or needs? Have you been victimized by Equity-Indexed Annuities? Brokers and brokerage firms generally act for the best interests of their customers. Oakes & Fosher handles cases for those situations when they do not. If you or someone you know has been victimized by broker negligence misconduct, contact Oakes & Fosher today for a free consultation.

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Were You Wronged by a Broker or Brokerage Firm?

Broker negligence generally occurs when a broker fails to recommend “suitable” investments for the customer based on factors such as age, employment status, financial situation and needs, directives as well as investment objectives and risk tolerance level. A stockbroker has a legal duty to the investor to make investment decisions that are appropriate (or suitable) based on these factors.

Broker misconduct generally falls into two categories (1) self-dealing and (2) failure to make suitable investment decisions for a customer. The rules, regulations and standards governing securities transactions are, however, complicated to say the least. A variety of abusive and unsuitable conduct may be occurring or may have occurred in your brokerage account without you having the slightest notion that wrongdoing may have taken place.

Typically, in a “suitability” claim the broker will invest the customer’s assets in securities that are too aggressive for the customer, which in turn subjects the customer’s assets to inappropriate market risk. If the market moves against the investor who is exposed to this unsuitable risk, the losses can be devastating.

If your stockbroker was negligent in finding you suitable investments, contact us for a free, confidential case evaluation.

Common Types of Broker Negligence Misconduct

There are many different types of investment fraud or negligence that can be differentiated by case types listed below.

In addition to the types of broker negligence misconduct above, one of the other most common types of investments that is often subject to broker negligence misconduct is equity indexed annuities. This is a type of annuity that proves to be alluring to some investors because it is pitched as a way to see profits on their annuity, without actually exposing their principal to risk.

What is an Equity Indexed Annuity?

Essentially, in an annuity, the investor receives part of the interest they would have received for a normal fixed annuity; however, the rest of the interest becomes linked to an equities index like the S&P 500. The investor can see returns based on how the index performs over the life of their annuity.

Annuities are investment vehicles designed for an individual’s retirement. Essentially, an investor pays scheduled premiums up until their retirement date—at which point they begin receiving scheduled distributions that act as their income during retirement.

A fixed annuity is pretty straight forward. The amount that the individual receives during retirement is dependent on the premiums they paid into the annuity—plus interest.

A variable annuity, on the other hand, operates differently. The premiums that an investor pays into the annuity are invested in the equities market. The amount that the individual receives during their retirement is dependent on how well the invested funds performed in the market.

The Down-Side of Equity Indexed Annuities

What investors are not told is how truly illiquid these products are—even more so than regular fixed and variable annuities. Cancellation fees for these annuities can range up to 20%, and the length of the surrender period is longer than with a regular variable or fixed annuity.  Because of this, these products should never be recommended to investors with higher liquidity needs.

Many securities brokers ignore their duty of acting in the client’s best interest and recommend equity indexed annuities because of the incredibly high commissions they receive when selling this product. Brokers can receive commissions as high as 10% of the premiums paid when an individual purchases an equity indexed annuity.

Most fixed annuity interest rates are just over 1-2% percent and the complex crediting formula leads to only small returns in a healthy equity market. This makes it almost impossible for the investor to actually see a profit under anything other than an exceptional performance by the index over the life of the annuity.

Securities brokers utilize the complex nature of equity-indexed annuities to push them onto unsuspecting investors. The truth is that these products are not suitable for any investor. Individuals would be far better off saving for retirement in other ways. If they are dead set on annuities, then fixed annuities are at least safer in regard to the fees and commissions charged to the investor.

If You Have Suffered Losses Due to an Alternative Investment – Contact Oakes & Fosher

Oakes & Fosher dedicates its entire legal practice to helping investors across the nation. If you believe that your securities broker placed you in a highly unsuitable alternative investment, you may be entitled to damages. Contact the Securities Litigation Attorneys at Oakes & Fosher for a free and private consultation.